The Window Tax

A Case Study in Excess Burden

Bibliographic Data

ID4030134
AuthorsWallace E Oates (Distinguished University Professor Emeritus and Professor of Economics, Department of Economics, University of Maryland, College Park, Maryland.), Robert M Schwab (Distinguished University Professor Emeritus and Professor of Economics, Department of Economics, University of Maryland, College Park, Maryland. .)
Year2015
Volume29
Issue1
Pages163-180
Publication date2015-02-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Journal of Economic Perspectives (JOURNAL)
Journal identifiersISSN: 0895-3309 • E-ISSN: 1944-7965
PublisherAmerican Economic Association (PUBLISHER • US)
DOI10.1257/jep.29.1.163
OpenAlexW2104654476
LanguageEN
Citations received6
References cited8

The window tax provides a dramatic and transparent historical example of the potential distorting effects of taxation. Imposed in England in 1696, the tax-a kind of predecessor of the modern property tax-was levied on dwellings with the tax liability based on the number of windows. The tax led to efforts to reduce tax bills through such measures as the boarding up of windows and the construction of houses with very few windows. In spite of the pernicious health and aesthetic effects and despite widespread protests, the tax persisted for over a century and a half: it was finally repealed in 1851. Our purpose in this paper is threefold. First, we provide a brief history of the tax with a discussion of its rationale, its role in the British fiscal system, and its economic and political ramifications. Second, we have assembled a dataset from microfilms of local tax records during this period that indicate the numbers of windows in individual dwellings. Drawing on these data, we are able to test some basic hypotheses concerning the effect of the tax on the number of windows and to calculate an admittedly rough measure of the excess burden associated with the window tax. Third, we have in mind a pedagogical objective. The concept of excess burden (or "deadweight loss") is for economists part of the meat and potatoes of tax analysis. But to the laity the notion is actually rather arcane; public-finance economists often have some difficulty, for example, in explaining to taxpayers the welfare costs of tax-induced distortions in resource allocation. The window tax is a textbook example of how a tax can have serious adverse side effects on social welfare. In addition to its objectionable consequences for tax equity, the window tax resulted in obvious and costly misallocations of resources

Ad valorem tax · Deadweight loss · Direct tax · Economics · Income tax · Indirect tax · Law and economics · Market economy · Monetary economics · Property tax · Public economics · State income tax · Tax avoidance · Tax reform · Value-added tax · Welfare · Fiscal Policies and Political Economy · Fiscal Policy and Economic Growth · Housing Market and Economics

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